The business environment is in a perpetual state of flux. Macroeconomic volatility, geopolitical implications, increasing cost pressures, and high inflation have meant that organizations are constantly navigating a sea of uncertainty.
Adaptation has become crucial for future growth. But navigating change requires more than agility: it calls for clarity of direction and a sense of purpose.
For businesses that know how to navigate change, there’s much to be gained – powering new business models, innovation, and transformation. And that’s where having a purpose can help. It’s a strategic decision-making tool that provides clarity and direction when everything else is undergoing periods of upheaval; it remains constant.
Our recent analysis of the FTSE 350 companies showed that organizations with a strong purpose statement outperform those that don’t have one on a range of key metrics, such as return on assets (ROA), return on equity (ROE), and environment, social and governance (ESG).
Of the businesses we analysed, those with a clearly defined and articulated, succinct purpose statement of 16 words or less saw the most improvement in key business metrics.
But how do you use purpose to drive greater outcomes?
Currently, 63% of leaders have told us that purpose helps them make strategic business decisions to help business growth.
However, it can’t be lofty and it can’t just be words on a poster you stick on the wall. Businesses must operationalize their purpose and embed it within their culture if it is to create strategic business opportunities. Purpose must give your people the ‘why’ – this is the emotional connection staff have to a business, which will help inform decision-making.
Businesses must operationalize their purpose and embed it within their culture if it is to create strategic business opportunities.
If employees believe in what their organization does, they will feel empowered to help it reach its vision, and this will contribute to a more successful business.
Your purpose should be strong enough to withstand challenge
A purpose is constant; it doesn’t change. Although your ambition and vision can change depending on market circumstances, your purpose should be strong enough to allow you to respond to challenges now and in the future.
If your employees are aligned with your purpose, it will see you through the tough times by building a better reputation and limiting churn.
However challenging the world around us gets, your staff, leadership, and stakeholders must know what you stand for, why you exist, and live this day-in and day-out.
Powering innovation and transformation
Exponential, systematic change is happening on all fronts. Businesses that try to navigate the next 50 years with the same business models of the past will not survive.
Our CEO Purpose Report cited “Developing new business models” as the biggest opportunity facing organizations and “Ensuring business resilience and agility” as the biggest challenge.
If employees believe in what their organization does, they will feel empowered to help it reach its vision, and this will contribute to a more successful business.
When purpose is used as a north star to guide all decision making, it powers innovation and transformation. It is uniquely placed to build clarity of direction, unleash innovation, build pride and connection to an organization, and lead others on a journey of change. But it’s important that your statement connects what you do with what the world needs.
After reviewing all the publicly-available purpose statements of the FTSE 350, we found that:
- When a purpose focuses solely on the business, it reads like a features and benefits list. It becomes transactional and constrains thinking and innovation by struggling to provide employees with a sense of a bigger picture and opportunity.
- When a purpose focuses solely on what the world needs, it reads like a wish, a hope, or plain purpose wash with no active involvement in changing the status quo.
Together is where the magic happens: giving the business and those that work there greater meaning and the licence to be bolder, more innovative, and more progressive in the solutions they create. And when transformation and innovation are purpose-driven, rather than by the bottom line, more likely to drive positive impact.
The changing economic landscape is putting the pressure on businesses. A third of CEOs have told us they’re still struggling to make purpose actionable in their organization. But if businesses can successfully embed their purpose, they will be better-placed to face any curveball the future might throw.
To find out more about how purpose powers business performance, read our FTSE Report: Purpose Matters here.
